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Modelling the Confidence in Industry in Romania and other European Member Countries Using the Ordered Logit Model

Author

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  • Gagea, Mariana

    (Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, Blvd. Carol I nr. 22, Iaşi, 700505, Romania)

Abstract

The application of qualitative choice models is usually made by neglecting the analysis of autocorrelated and heteroscedastic errors. In the current paper, we aim to evaluate and mitigate the effects of violation of such a hypothesis using as example the modeling of confidence in industry in relation to the macroeconomic indicators for six countries of the European Union. The ordered Logit model identified in the paper revealed the common macroeconomic factors which explain the formation of confidence in industry for the countries considered in the analysis. By mitigating the heteroscedasticity problems and specifying in the model the functional form of the error dispersion, the statistically significant improvement of the model performance was obtained.

Suggested Citation

  • Gagea, Mariana, 2014. "Modelling the Confidence in Industry in Romania and other European Member Countries Using the Ordered Logit Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 15-34, March.
    • Handle: RePEc:rjr:romjef:v::y:2014:i:1:p:15-34
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    References listed on IDEAS

    as
    1. Bruno, Giancarlo & Malgarini, Marco, 2002. "An Indicator of Economic Sentiment for the Italian Economy," MPRA Paper 42331, University Library of Munich, Germany.
    2. Teresa Santero & Niels Westerlund, 1996. "Confidence Indicators and Their Relationship to Changes in Economic Activity," OECD Economics Department Working Papers 170, OECD Publishing.
    3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    4. Goggin, Jean, 2008. "An Analysis of the Potential of the European Commission Business and Consumer Surveys for Macroeconomic Forecasting," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2008(4-Winter), pages 46-67.
    5. Daniel McFadden, 1975. "The Revealed Preferences of a Government Bureaucracy: Theory," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 401-416, Autumn.
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    Cited by:

    1. Mariana Hatmanu & Cristina Cautisanu & Mihaela Ifrim, 2020. "The Impact of Interest Rate, Exchange Rate and European Business Climate on Economic Growth in Romania: An ARDL Approach with Structural Breaks," Sustainability, MDPI, vol. 12(7), pages 1-23, April.

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    More about this item

    Keywords

    industrial confidence indicators; ordered logit model; Granger causality test; heteroscedasticity;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software

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